Understanding Why You Should Refinance for Additional Features
When you first took out your home loan, you may have chosen a product based on the interest rate alone. However, as your financial situation evolves, you might find that your current mortgage lacks features that could significantly improve your cashflow and reduce loan costs. Refinancing your home loan to add features like an offset account or redraw facility can transform how you manage your property investment and save money over the life of your loan.
Many Perth homeowners are stuck on high rates with limited features, paying too much interest without realising that potentially accessing a different product could save thousands of dollars annually. Whether your fixed rate period is ending or you've had your variable interest rate loan for several years, conducting a home loan health check can reveal opportunities to enhance your mortgage.
What Features Can You Add When You Refinance?
When considering mortgage refinancing, it's worth understanding which features could benefit your financial position:
Offset Account
An offset account is a transaction account linked to your home loan. The balance in this account offsets your loan amount, reducing the interest charged on your mortgage. For example, if you have a $500,000 home loan and $50,000 in your offset account, you'll only pay interest on $450,000.
Redraw Facility
A redraw facility allows you to access any additional repayments you've made above your minimum requirements. This provides flexibility if you need funds for renovations, emergencies, or other investments while maintaining your loan structure.
Split Loan Options
You can split your loan amount between fixed and variable interest rates, giving you the security of knowing part of your repayments while maintaining the flexibility to access a lower interest rate if market conditions improve.
Additional Repayment Features
Some products allow unlimited additional repayments without penalty, helping you reduce your principal faster and save on interest rates over time.
The Refinance Process: What to Expect
The refinance application doesn't need to be overwhelming. Here's what the refinance process typically involves:
- Loan Review: Assessment of your current mortgage terms, interest rate, and features
- Property Valuation: Determining your property's current value to establish available equity
- Compare Refinance Rates: Analysing current refinance rates and products with enhanced features
- Application Submission: Completing the refinance application with your chosen lender
- Settlement: Finalising the switch from your old loan to your new featured product
Ready to get started?
Book a chat with a Finance & Mortgage Broker at Luxe Finance Group today.
A mortgage broker can handle much of this process on your behalf, comparing multiple lenders and products to find options that align with your financial goals. At Luxe Finance Group, we understand Perth's property market and can identify which features will deliver the most value for your circumstances.
When to Refinance for Additional Features
Several situations make refinancing particularly advantageous:
Coming Off a Fixed Rate
If your fixed rate expiry is approaching, this is the ideal time to review your options. Rather than automatically reverting to your lender's standard variable rate, explore products that offer competitive rates plus valuable features. Many Perth homeowners find themselves coming off fixed rates and discovering they could access a lower interest rate while simultaneously adding an offset account.
Life Changes
Career progression, business ownership, or inheritance might mean you now have higher account balances. An offset account becomes increasingly valuable as your savings grow, potentially saving you significant interest over time.
Investment Property Plans
If you're planning to access equity for investment purposes or want to consolidate debt into your mortgage, refinancing provides an opportunity to restructure your loan with features that support wealth creation strategies.
Calculating Your Potential Savings
The benefits of refinancing to add features extend beyond convenience. Consider this scenario:
A Perth homeowner with a $600,000 mortgage at 6.5% interest maintains an average offset account balance of $40,000. This effectively reduces their loan balance to $560,000 for interest calculation purposes. Over a year, this could save approximately $2,600 in interest – money that remains in their offset account rather than going to the lender.
When you factor in the ability to switch to a variable rate that's potentially 0.5% lower than your current rate, the savings compound further. A half-percentage point reduction on a $600,000 loan equates to approximately $3,000 annually in reduced interest charges.
Additional Considerations for Perth Property Owners
Perth's property market has unique characteristics that influence refinancing decisions. Recent property valuations in many suburbs have shown growth, meaning you may have more equity available than when you originally purchased. This equity can be leveraged through refinancing to:
- Release equity to buy the next property
- Unlock equity for renovations that further increase property value
- Access equity for investment in shares or other assets through strategies like debt recycling
Your borrowing capacity may also have improved since your original loan, especially if you've received salary increases or reduced other debts. This enhanced capacity might qualify you for premium loan products with superior features that weren't available to you previously.
Avoiding Common Refinancing Mistakes
While the benefits of mortgage refinancing are substantial, homeowners should be aware of potential pitfalls:
- Focusing Solely on Rate: A lower interest rate is valuable, but features like offset accounts can provide equivalent or superior value depending on your circumstances
- Ignoring Costs: Factor in property valuation fees, application fees, and potential discharge costs from your existing lender
- Not Reviewing Regularly: Market conditions change frequently; conducting an annual loan health check ensures you're not missing opportunities
- Overlooking Fixed Rate Timing: Lock in rates when you believe rates have peaked, but ensure the fixed product still includes necessary features
How Luxe Finance Group Can Help
Refinancing your mortgage to add valuable features requires expertise in comparing products across multiple lenders. Not all offset accounts function identically, and redraw facilities can have varying terms and conditions. Understanding these nuances ensures you select a product that genuinely delivers value.
Our team specialises in home loan refinance for Perth property owners, whether you're in Nedlands, Fremantle, or any other Perth suburb. We'll assess your current loan, identify which features align with your financial strategy, and manage the refinance application process from start to finish.
Whether you're interested in refinancing to add an offset account, exploring options after your fixed rate expiry, or considering investment loan refinance options, we can provide tailored advice specific to your circumstances.
Don't continue paying too much interest on a loan that lacks the features to support your financial goals. The refinance process is more straightforward than many Perth homeowners realise, and the potential to save money refinancing while improving loan functionality makes it worth exploring.
Call one of our team or book an appointment at a time that works for you. Let's discuss how refinancing could enhance your home loan with features that deliver real financial benefits for years to come.
